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Using Coaches to Find Your Unique Genius & Turning Inflation Into Wealth



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Gary Pinkerton starts the show by talking about his process as he pursues his “unique genius” which involves hiring a coach who helped him tremendously. In the interview segment, Jason Hartman interviews Charter Financial Analyst Daniel Amerman to talk about the US economy. They discuss Social Security Administration’s unfunded liabilities, Dan’s Personal Challenges Created by the National Debt matrix, and Built-in inflation.

Announcer 0:04
Welcome to the heroic investing show. As first responders we risk our lives every day our financial security is under attack. Our pensions are in a state of emergency. A single on duty incident can alter or erase our earning potential instantly and forever. We are the heroes of society. We are self reliant, and we need to take care of our own financial future. The heroic investing show is our toolkit of business and investing tactics on our mission to financial freedom.

Announcer 0:39
Hello, and welcome to Episode 131 of the heroic investing show. This show is a podcast for first responders, for active duty members of the military, for veterans, retired first responders, EMTs firefighters and police officers. And really for any entrepreneur or individual out there that still has a W two income, but is looking to increase their freedom, their passive income and their ability to pursue unique genius. One of the things that I’ve done over the past year, after a lot of soul searching and transitioning from an active duty officer in the Navy to starting up my own business in the personal financial services, world insurance based planning and infinite banking. If you’re familiar with that term, to building our own real estate portfolio, as I started to ask the question, you know, my family is graciously in a pretty good position and I have a pension and I’m looking for what do I do out there to contribute? Like, what do I really want to do? It’s not going off and golfing. I know a lot of people enjoy golfing, it’s not going off and fishing. It is continuing to contribute to the world. And I as part of that kind of soul searching, I hired a coach, wonderful lady, you can go find out about her Her name is Tammy Brannon. And her company is called blueprint and instinctive life instinctive life, and she works for you on a program called blueprint is what I should have said. And it’s all about finding your unique genius, really, and helping people enabling people to find that. And then what I want to do. And what I found out my unique genius is to inspire others towards entrepreneurship, and towards developing a life with a solid foundation, with some passive income to free up their time. So after safety and security, then we buy back our time. And when we have our time, then we focus on those things that have been hidden away in the closet that we know we enjoy doing, but we just haven’t had a life to be able to go do. That’s what inspires me is to help people achieve that. Because I believe that there are millions of people drive into work at McDonald’s and Walmart and other places, or even Ernst and Young, if that company’s still around, anyways, you know, to very even large, white collar corporate jobs that they don’t want to do. But they’re there because they have large college debts, or they have expectations that they need to fulfill with very large incomes, you know, they have family goals, but it doesn’t inspire them. And I think there’s very little that is more sad than people who are spending decades working at jobs building up a massive of money, so that they can finally start to enjoy life when they’re old and unable to do so at the level they could have in their 20s and 30s. I think that’s really sad. So that’s what inspires me is to help people get back to what I remember as a child, which was growing up in a farm in the Midwest, and everyone around me, had this little business of theirs, maybe it was in the garage, maybe they actually had brick and mortar on Main Street. Maybe they were just making things under the shade tree. That’s what we were doing. So it’s just about people being empowered, understanding that they can add value and get compensated for it and then going off and doing it. Somehow in America, we turned into the industrial age, and we forgot about a lot of that, you know it was go to school, get a good job, get locked in for life, get a gold watch when you’re done and your company is going to take care of you. I mean, the last part of that story has been gone for a while. But we still hold on to go to school get a good job right. And once we let the government into backing student loans, right, that starts an entirely different discussion. So if you take the the checkmate scenario of the government will back loans provided to students that opens up the door for the education campuses around the country to inflate education expenses at over 8% a year. For a couple of decades. It’s completely outpaced people’s ability to get any return on investment from it, as I mentioned on a episode about a month To go, I was reading that article of the dentist who has a million dollars in student loan debts, that’s really hard to overcome even with 500,000 a year of income, because you also have a massive lifestyle that you’ve built up, and you have a lot of interest being owed on those debts. So I think we’ve got some stuff upside down. And what inspires me is to get America turned around and get a majority, at least to get a movement of people who are putting some security in place a solid foundation, saving their money in an efficient place, and then buying back their time with passive income so that they can go off and pursue master their trade and demonstrate to the world their unique genius share with the world, their unique genius is a better way to say it. So that’s what gets me going. So what are we talking about here in Episode 131. So today, Jason is talking with Dan Ammerman, and I think Dan is just a really interesting guy. He’s he’s a little bit of an analyst, right? So he’s, he’s gets down into the details sometimes, but he does a great job on the several episodes that he has talked with Jason on here on the creating wealth show over the years, back in episode heroic investing 111. We had him on and he was talking about inflation. I had a three part series there. One was Doug Berg, one was Dan Ammerman. Another one was Jason just talking about inflation. And that was a nice little couple weeks series that we had going on there. But Dan Ammerman has done so much more for me in my life, he did a series back in like 2011. It was an email series back when he used to get an email a week. And I went through two or three months of really, really starting to understand inflation to understand how to be on the same side of the table with the Fed. And that’s why I decided to play this episode following last week. And last week, Jason, we were doing a clip of Jason at a local event, where he was talking about inflation and the Federal Reserve. So this is a really, really nice follow up to that. So I pulled it out of the archives. It’s actually even a little bit newer than the one you listened to last week. So both of them are 2016 2017 era. They’re very current. They’re after President Trump has gotten into office. And so I think you will you will really appreciate this. It’s a little bit longer as is my intro, so I will cut it short. They’re really appreciate you listening to the episodes here on on heroic investing. I would love to hear your feedback, please drop me a line at Gary at Gary Pinkerton Comm. Also feel free to just give us a ranking at iTunes or Stitcher Radio or wherever you get your podcasts. Thanks so much. And here are Jason Hartman and Dan Ammerman.

Jason Hartman 7:52
It’s my pleasure, welcome back, a multi returning guest and that is Mr. Daniel Ammerman. He’s a Chartered Financial Analyst. And we’ve had him on the show, many of you asked to have him back. In fact, one of our listeners just recently asked to have Dan back. And I love his work because it’s super wonky. It’s super detailed. And he really analyzes things on a very, very deep level. So it’s a pleasure to have him on the show again, Daniel, welcome back. How are you?

Daniel Amerman 8:19
I’m doing really good. Jason. Thanks for having me back.

Jason Hartman 8:22
Good. remind our listeners, where are you located? Are you in like Minneapolis or something? Um,

Daniel Amerman 8:26
I am on a hillside above Lake Superior. Okay.

Jason Hartman 8:31
Good stuff.

Daniel Amerman 8:33
So are that more than Northeastern Minnesota just unbelievably beautiful place, particularly these days?

Jason Hartman 8:39
Great Lakes area. Good stuff? Well, Dan, what’s some of your latest and greatest, you’ve had a pretty productive year, you’ve got lots of new outlooks and analysis. You know, what, what are you working on? What’s kind of the latest and greatest from Dan Ammerman?

Daniel Amerman 8:54
Well, what I’ve been working on is being able to exactly identify and quantify a lot of the national issues that we have going on, and then make them very personal in terms of the implications for an average person, and also directly tie this in to returns and financial modeling for real estate investment strategies, which is just fascinating stuff. But I guess the starting point, is that in my wonky way, I did something that was quite fun. And that was I reverse engineered the Congressional Budget Office, long term outlook. So I can take the US government the way that they look at it, and do various things with expenses, with taxes, with inflation with interest rates, look at all of that, and see the impact for the nation as a whole. And then I can go from that to the impact for individual savers investors and then the impact on various things. Types of real estate investment strategies. And one way I like to think about it is that there are many different ways that the federal government can deal with the issues that it has in terms of, let’s say, the national debt, and then in the coming rapidly escalating payments, they’re going to be due to the boomers for Social Security first, and then Medicare. And the really interesting part is some ways of doing that are very profitable for Donald Trump, and other ways he would lose a fortune, and I can identify each

Jason Hartman 10:31
way. Now when you say for Trump, are you talking about his personal portfolio or just his legacy to the country,

Daniel Amerman 10:39
something that people are just not picking up on? But I think is really important. And a lot of it has to do with kind of a base ignorance on the part of lesson immediate who’s not really following these issues, is that he is not a generic Wall Street billionaire. He has an entirely different source of funds than many of the famous people you might hear about who have much greater networks even that he does. He’s real estate investor. And I’m not saying that I’ve modeled his exact personal exposure, whose own asset liability combination, I’m sure that’s very complex. But he is generically subject to many of the same things that all real estate investors are. And that means that he has a very different exposure to what’s being done when it comes to things like interest rates and inflation and the trade off between them and so forth, then, let’s say a wall street investor would and I think there could be some very important implications there.

Jason Hartman 11:38
Yeah. Well, what I like to say, Dan is Donald Trump is our first real estate president. You know, I love love him or hate him. And there’s certainly a lot of hate out there, especially in the media. And just to restate my position, I don’t love the guy by any means. I think he’s a bit of a doofus. So I can’t believe some of the stuff that comes out of his mouth. Like, if I had his job, I keep thinking I’d be so much better at that. But the funny The funny thing is, is that, you know, you’re well, but not the funny thing, but the tragic thing is he just does can’t get a fair trial. I mean, the media just won’t give the guy a break. It’s, it’s, you know, really, that’s piling on all the time.

Daniel Amerman 12:16
I’m not trying to get partisan with him in any way. I’m trying to do just the opposite there. And the way that I phrase this, is that let’s say Donald Trump had two choices. And they were each equally good for the nation. Okay, neither one hurts the nation. Neither one helps the nation more. So it’s kind of neutral for the nation as a whole. And with one of those choices, Donald Trump makes a lot more money than he does right now. And with the other of those choices, he

Jason Hartman 12:50
loses a fortune. Yeah, well, obvious choice. Yeah.

Daniel Amerman 12:53
If we assume Yes. If he has the choice, and it’s all the same for the nation. What do you think Donald would do? And I think there’s a lot of information value there. Sure. Sure.

Jason Hartman 13:02
Okay, good, good stuff. Well, well, first of all, I want to ask you, before we dive into that, let’s talk just for a moment about the CBO, the Congressional Budget Office right now, I don’t know a lot about the CBO. But from what I little I do know, it seems like on both sides of the aisle, they’re viewed as a pretty credible source. I don’t believe much about what the government says, especially when it comes to the consumer price index or unemployment statistics. You know, the government has a huge incentive to manipulate everything and lie to us like crazy, but I don’t know is the CBO credible? You know, what, like, what, what do you What’s your take?

Daniel Amerman 13:41
Everything’s relative. It is my take on that. And I look at statistics from quite a few different sources. And they’ve been going different directions. For instance, if you look at the people who are forecasting the long term future, one of the things I really focus on is financial viability, because this is so tied in with interest rates, and inflation, and so forth. If you look at the Office of Management and Budget, which is the White House, they do their own long term forecasting. They provide no supporting detail whatsoever. They just say we’re the government, trust us.

Jason Hartman 14:21
Scary statement. It’s like, like the Ronald Reagan quote, I’m, I’m here from the government. I’m here to help her or whatever that was. He said it was right. Oh, it was so funny.

Daniel Amerman 14:31
And if you if you look at the Social Security Administration, which is another source of remarkable long term projections, I would say they should be writing fiction. Some of these projections are so remarkable in terms of the optimism and the, the sort of tell you what they’re doing, but there’s no way that you can track the numbers. And I’m not saying I can do everything with aggression or budget office, but they provide sufficient documentation where you can figure out what they’re doing. That then gives you the opportunity to check on the reasonableness and to run your own assumptions and kind of see, okay, they’re being, you know, this probably not gonna happen. This is way too aggressive, and so forth. But that is what I will give the Congressional Budget Office credit for out of all the government agencies who are doing long term projections. They’re the only ones who will really show you what they’re doing in terms of the detail that it needs to replicate it, which is why I base my work on their long term outlook. Yeah,

Jason Hartman 15:29
good, good stuff. Well, I had Laurence Kotlikoff on the show a couple of times, I interviewed him again yesterday. And then I’m interviewing him again tomorrow. And he’s, as we both know, done a lot of work on this unfunded mandate unfunded entitlement scenario. And you talk about that a lot, too. And some of your latest work is on that topic and what it means not only to the country, but to the individual. And that’s what I love about your work. So let’s talk about that. Let’s go ahead and dive in.

Daniel Amerman 15:56
If you look at it, literally, in terms of what is due? First of all, if you want to get technical, there is no unfunded liability.

Jason Hartman 16:10
What does that mean?

Daniel Amerman 16:12
Because the way the law is written is its social security. ministration does not have to make any payments, that it does not have the money to make,

Jason Hartman 16:20
right, but it’s better make them or we’re gonna have riots in the streets. So

Daniel Amerman 16:24
for as long as the trust funds are outstanding, and there is deep weirdness, when it comes to what the trust funds really are. They’re not at all what the government says they are. And I’ve got a really interesting analysis, called two sets of books where I look at two sets of books that the government keeps or that the trust funds, and they’re real in one setting. They’re fictional on the other. And it’s just a very strange combination. But once those are gone under law, the benefits are supposed to be cut, unless the taxes are raised. Now, it’s a political question about what happens at that point. But that’s also kind of a distraction, because there are so many different tools the government can use to change the amount of payouts that are being made. And one of these I’m going to have a new analysis coming out on soon it was just announced a couple days ago, is we have a lot more information on the 2018 Social Security increase, which is about 2%. And that’s the biggest six years. So that sounds like really good news. Except you have this issue with hold harmless, which for people who are not collecting Social Security, many people who have that that may sound like some very strange term, what does that mean? What it means is that Medicare premiums, the Social Security payments, net of your Medicare Part B premiums cannot actually fall in nominal terms. But increases Medicare premiums are allowed to eat up your entire increase in Social Security, just as long as the race don’t fall. So what’s happening is you have all these social security beneficiaries. According to The Wall Street Journal, the average increase in the monthly Social Security payment is supposed to be $28, based on the 2% increase, but of that $25 is going to increase Medicare Part B premiums. So the net increase is only $3. And that means Social Security, even though everyone will tell you it’s inflation indexed people want you to believe in this stuff. It’s very openly not it’s only partially inflation index, where they’re supposed to be getting even according to government inflation statistics, a $28 increase, they’re really getting a $3 increase.

Jason Hartman 18:43
So in other words, that means people are getting poorer, right?

Daniel Amerman 18:47
their CDs, the standard of living that can be supported by Social Security is falling.

Jason Hartman 18:53
Yeah, and even even if even if they really got the whole increase the inflation index itself is maligned. So you know, it’s not it’s not real because of that. So it’s, it’s like a double, it’s a one two punch, right?

Daniel Amerman 19:07
Oh, it’s a triple, at least that’s true. The other thing you have to keep in mind is the Social Security is not paid off the CPI you urban is paid off CPI W, which is wage earners, which has been substantially depressed compared to expenses, which is CPI, you over time. And then you take the composition of the CPI u and in fact, retiree expenses, tend to be some of the highest cost portions of that index. So even if you were to give the government the benefit of doubt, and say, oh, all these calculations are immaculate, they’re working exactly the way they’re supposed to. You can still compare actual retiree expenses to typical CPI, you typical national expenses and you know, all the accounting they’re doing for cell phones getting smarter and all that kind of stuff. And then you take that and you look at things like the holding harmless and the adjustments as well. As the difference between labour index and CPI u, and all of a sudden you’re moving it down to 3% per year very easily.

Jason Hartman 20:06
Mm hmm. Yeah, yeah. It’s shocking how this is. But what that

Daniel Amerman 20:11
does is that that does two things. And again, because I’m immersed in the heart of this, I see the two side by side, it’s just like a perfect meshing that I think people need to be aware of. This is mandatory from the government’s perspective, to avoid financial disaster over time. They have enormous incentives to make this happen. But that doesn’t change the harm that it does to individuals. I think we’ve known each other since 2008. At least,

Jason Hartman 20:39
yeah, that’s almost almost 10 years, Dan, we’re gonna.

Daniel Amerman 20:44
And there’s been a phrase that I’ve been using the whole time to anticipate what the government’s gonna do. And that is that it will meet promises in form, but not in substance. And it will do so in a deceptive manner as a political requirement. And that’s exactly what we’re seeing with social security theory is fully going there. In practice, no, it’s not this is being done in a way that the average person doesn’t understand, because that keeps the politicians in office.

Jason Hartman 21:17
Yep. Yeah, I know. That’s what they’re, that’s what they’re motivated to do. So a heavily indebted nation, there are, you know, there’s a lot of meaning on a national level and a global level for that, right. But the typical impact on the investor, right? What does that mean? And, and I love how you tie it into real estate, because I know that’s one of your favorite asset classes, at least it used to be, I think you can, you can correct me if I’m wrong. But you know, I love the multi dimensional nature of income property and how you can, you know, you can sort of switch strategies, because of that, but, but kind of tie that in for us, I’m looking at your chart, by the way, you’ve got a great chart on this on your website.

Daniel Amerman 21:59
This is something I’ve come up with recently. And I’m really happy with it. It’s, it’s titled personal challenges created by the national debt, and its analysis matrix. And what I mean by that is that each component here has one or more detailed analysis that I have the show for people exactly what’s going on there. And the top row is the nation. And the bottom row is typical investor impact. So first, and again, when you run the numbers, and this is just fascinating information. When you look at what’s going on right now with the Federal Reserve, and what they’re talking about with increasing interest rates and so forth. And you take into account the United States has a $20 trillion, national debt, total debt. Okay. And this is this is, incidentally, one of those games that people play is that they’ll say, well, it’s not really a $20 trillion debt. It’s about a $15 trillion debt, because the rest is just like this fictional entries, right. But the problem is, the fictional entries are the social security trust funds. So either you accept, we have a $20 trillion national debt, which is larger than our national economy, which economically history would indicate what really hit the problem area there. Are we only have 75% of the economy, but then Social Security has no safety margin whatsoever.

Jason Hartman 23:25
No fun. Yeah. And when you say the economy, you’re talking GDP, right, which I believe is about 16 trillion now, right? somewhere around there.

Daniel Amerman 23:32
It’s over 18.

Jason Hartman 23:34
Oh, well, hey, we’re doing better. You know, there’s another manipulation, look at the way they manipulate GDP. But we don’t have time to go into the

Daniel Amerman 23:42
GDP deflator, and the mysterious things that happen there. It’s time. Yes. But so what I look at, and I’ve got specific analysis that track each one of these in different ways. But it’s crucially clear when you look at a $20 trillion national debt that interest rates can’t rise too much. That’s one of the things I model is that right now, our interest rates, if you look at the 10 year Treasury, are about 5% of what they were on average, between 1962 in 2007. When they’re a little over 7%. And it’s just amazing. What happens if interest rates were to return to historical norms. What does that mean? It means the US government’s deficits rise as soon as everything has a chance to adjust by a trillion dollars a year just in interest costs. Which absent a major, just huge tax increase immediately since the deficit and the national debt, shooting upwards out of control. So all else being equal. A heavily indebted nation needs lower interest rates.

Jason Hartman 24:54
So does that mean rates will stay low?

Daniel Amerman 24:59
It does There’s other things that can go on to. And that’s what are my most recent analyses, as I showed how you can have higher interest rates and maintain financial solvency, you do it by boosting the rate of inflation. Okay. But if you have high interest rates and the rate of inflation doesn’t jump is a financial disaster scenario. So one or two things happen, either our interest rates and this would everyone is projecting This is what the government’s projecting stay at a much lower range than usual, over the coming 10 2030 years, or at some point things spiral out of control unless the inflation loophole issues. And what does that mean? Well, I also track this very specifically within analyses, in terms of what that does to the average retirement investor, who is, let’s say, using interest bearing assets, to say, what does that do to their wealth accumulation? And what does that do to their standard of living in retirement, this is just so critical for retirees because more than anyone else they are planning on be able to make payments, or to pay for their expenses, using interest payments. And that whole thing has just been crushed by Federal Reserve actions since the financial crisis. So when we say a heavily indebted nation needs lower interest rates that may sound very abstract to most people. But the bottom line for all of us, on a personal basis, less wealth is being created. And we have a lower cash flow in retirement than we otherwise what? All speaking. So this is absolutely life changing. isn’t happening right now. But people are not aware of the connection. And of course, as a real estate investor, on the other hand, or interest rates do be pretty nice.

Jason Hartman 26:49
Mm hmm. And continue to be pretty nice, though. Yes. Okay. All right. So that means that the population overall is becoming poor,

Daniel Amerman 27:00
right? Yes, exactly. And,

Jason Hartman 27:02
and, you know, I’ve wondered a lot. Danna racked my mind with this. And I just looked at the homelessness, and it seems like every city now, it’s just homelessness is just a massive problem. This is purely anecdotal. I have not studied this issue. I just see it everywhere. I mean, it wasn’t like that when I was a kid. And, you know, it wasn’t like that when I was in my 20s. But it’s like it now. And, you know, I just got to think, you know, the, the liberals will say, Well, you know, Reagan closed all these mental institutions. And ladies, I mean, oh, my God, you know, it’s probably too long ago to matter by now. But I don’t know. It really does seem like that is a huge symptom of this, possibly. But on the other side of it, you know, things, technology has advanced so much that, you know, in many ways we are living better. Now. This is what I hate about hedonic indexing, by the way. I mean, it’s it’s logical, it has a rational basis. But it basically says that if you directly index, and that’s what the government does to, you know, Many will say, I’m sure you will, and I will, to an extent manipulate the inflation rate, lower the published rate, it says that we aren’t entitled to progress. You know, I mean, think about it, if you had Donnelly indexed from the time and Edison invented the light bulb, or someone even way before that invented agriculture, or the wheel, you know, I mean, everything would look like it’s free nowadays. But it’s not. It’s simply not true. Right. So,

Daniel Amerman 28:45
again, there’s there’s a difference there. Yeah. And this is something we’ve talked about over the years, is that saying there’s one rate of inflation is inherently fictional, you can’t do it. It’s different for it’s not just different for every person, because every person’s consumption patterns, on average, a little bit different. It’s different for each person in each year of their life. Because our spending patterns change as we age. And this is so critical when we’re looking at someone who’s looking to get in violence, say with Social Security payments in their later years, because the hedonic of what their smartphone will do for them. Have one is almost meaningless compared to the much larger share of their income. Can I buy? food and shelter? Yeah, right. Those have been rising faster than the overall inflation index.

Jason Hartman 29:44
Okay, so So can we pause a little bit, I want to get into your analysis here, but let’s dive into this. Is there any inflation or not because that’s what we’re kind of talking about. So let’s just go a little deeper if we can in that. Go ahead with what you’re saying and I want to throw some questions I get

Daniel Amerman 30:01
a lot depends on the individual. I have been arguing for years, as you know that the government has an enormous incentive to choose a method of inflation calculation that will present lower results than would otherwise be the case doesn’t make sense, I almost have to do that, because that determines how much gets paid out. So security, that determines how much gets paid out to workers who have cost of living adjustments, and so forth. So there’s an enormous incentive to do that. And then we also have other factors, like the reporting rosy economic statistics, is based upon having a low rate of inflation. You know, the lower the rate of inflation, you report, the higher the rate of economic growth,

Jason Hartman 30:47

Daniel Amerman 30:48
Yeah. So so there’s there’s multiple different reasons for them to do that.

Jason Hartman 30:53
Oh, yeah. Yeah, no, no one will deny, at least No, none of my listeners will deny that the government has an incentive to manipulate the numbers. You know,

Daniel Amerman 31:02
that’s about sure. But you know, the other things you’re looking at too, is and of course, an awful lot of the shelter component depends on where you live in the country. For many areas in the country to say we have almost no inflation, when you look at what’s been happening to rents. That’s like a gross insult. Oh, total, when you look at what’s happening to housing payments, and

Jason Hartman 31:26
here’s, here’s one of the problems with the housing thing, you know, it’s just so maligned, because the density of housing has increased dramatically, you know, in in 1972, or 1974. Someone could buy their first home, in this beautiful area of Newport Beach, California, called harbor view homes. Okay. And they’d get it they’d get, you know, or, or it could be, you know, even not as nice in area, Lakewood, California, that sort of stereotypical baby boomer, you know, post World War Two area, right, they get a quarter acre lot. Yeah, their square footage wouldn’t be huge, that square footages are on average, you know, higher today. But it’s the square footage of living in a condo or a townhome versus a single family detached home, in a great neighborhood with great schools on a big lot. And, you know, greenbelt and walking areas, and, you know, the location, being close to the beach, etc. It’s not, you know, the stuff is so false the way it’s presented. And you and I talked, you know, just to give you a little more firepower for this discussion, you and I talked about the Self Service revolution, if we’ll call it before we started the show today. And you know, so much of what we do today is self service, the service component has gone away, you know, we’re doing everything online, we’re doing it ourselves. We used to have a lot of this stuff done for us. We used to not pump our own gas. Now we do. You know, I hate these restaurants. I go to these, you know, modern kind of cool, trendy restaurants, where you stand in line to wait to order your food, and then they do bring the food to your table. Sometimes they don’t even do that. And they still expect a frickin tip. I’m like, you’re not waiting on me.

Daniel Amerman 33:20
It’s 20% tip.

Jason Hartman 33:21
Yeah, yeah. You know, when they turn that little iPad over, and they’re using square, whatever, you know, the suggested tip is 20% 25%. I mean, like, I was in a taxi in Austin, Texas, a few months back, and the chip choices were 25 to 40%. For this dirty, disgusting taxi. I mean, are you kidding me? Like, I’m happy to tip but not for self service. Okay. Like, like, the restaurant example is totally clear. I mean, you know, you know, so that is that is inflation. You know, you used to always go to restaurant you always got waited on. Now, you’re not getting waited on. I mean, sometimes you are obviously but there’s a lot more inflation that can’t really be calculated, or we don’t really see or acknowledge, right.

Daniel Amerman 34:09
Yeah, there’s other I think the best example, and this is true also of corporate employees, which is particularly true for anyone who lost their self employed and playing their own insurance to claim a low rate of inflation when you look at what has been happening with health care premiums and deductibles is fantastically insulting. Yeah,

Jason Hartman 34:28
yeah. So the so the deductibles are higher, the premiums are higher, but Dan, not just that the exclusions are higher. Okay. If you look at any insurance policy you have nowadays, because these insurance companies have been litigated and litigated, you know, they just exclude everything now, you gotta buy all these separate policies nowadays. You know, like as a business owner, right. You know, your your basic business owners policy that used to cost you know, very little money used to cover all sorts Two things, employment issues, you know, media liability, defamation stuff like this. Now, you got to have a separate policy for everything, you know. And so that’s another sign of inflation. Great point, you know, look at it look at a typical investors, you know, homeowners insurance policy nowadays, you know, it’s doesn’t cover wind and hail and you know it, they got a million exclusions, another sign of inflation.

Daniel Amerman 35:24
Good. It’s not in this not included in the indexes.

Jason Hartman 35:27
Yeah, right. Right. Okay. So your contention is, there’s a lot more inflation out there than we really see. And I’m gonna agree with you, right.

Daniel Amerman 35:36
And you can look at that on multiple different levels. And that’s part of it, too, is understanding there are quite explicitly multiple different levels, if you dig into it, and you can explain a great deal there. But again, when you run the numbers over time, and this is very traditional, we have, you know, this goes back many centuries. If you have a heavily indebted country that controls the value of their own currency, they have influence over the value of their own currency, what do they do, they inflate, they have to now some people focus just on the extreme examples there. And they look at hyperinflation, you know, essentially defaulting to inflation or something like that. There’s certainly examples of that. But the much more common historical norm, particularly if you have a functioning economy, is to moderately increase the rate of inflation. And this is part of what I did in a recent analysis. And I was looking at what this does to standard of living in retirement going out 10 years, 20 years, 30 years. And if I recall, right, the numbers that that I was generating, or a 10 to 15% reduction, 10 years now 35% 20 years out 50% 30 years out, just from a very little, little more than 2% per year difference in the rate of inflation. But at the very same time that’s going on when you’re doing what I’m doing, you’re running the national numbers, having a 2% higher rate of inflation is magic, in terms of maintaining financial solvency.

Jason Hartman 37:17
Right, right. And yet, nothing is free. And Dan, what I always say is that, you know, you can pretty much bank on inflation, because you know, one thing I would say never bet against the Fed, align your interests with the most powerful forces, the human race has ever known. Governments and central banks that have standing armies. Okay. And, and, you know, it’s a great business plan for governments. I mean, look, we can grouse all day about how bad fiscal and monetary policy is. But the fact is, if you’re the government, and you know, the incumbents want to keep their power and give out goodies. They’re not going to stop doing that. Just look at the incentives, right, follow, follow the incentives.

Daniel Amerman 38:02
Oh, they’re enormous. And along, they’re enormous.

Jason Hartman 38:05
And then so they’re going to stay in office, they’re going to keep spending, and, you know, keep being profligate, and inflation is a fantastic business plan for governments, isn’t it?

Daniel Amerman 38:15
Oh, it is it is. And you can tell that I’m not just modeling the future. But looking back at the past, I have kind of a fun financial analysis that I just put out. Yesterday, I took a look at Warren Buffett’s prediction from last month that we would be at dow 1,000,100 years, that 1 million or how Wow. And I ran the numbers on it, you know, because then he realized when he says that people think that was ridiculous. And he goes, Oh, no, this isn’t ridiculous at all. Just run the numbers. Well, okay, come up with this challenge. And I ran the numbers. And there is virtually no profit in going from dow 23,000 to dow 1,000,100 years. If we have a historically average rate of inflation,

Jason Hartman 39:03
you’re you’re just strictly keeping pace with inflation. You’re just you’re just hedging. That’s all

Daniel Amerman 39:08
particularly on an after tax basis. Wow, your annual return is four hundredths of 1% per year. In inflation adjusted terms. If we go to dow 1 million, it’s just amazing.

Jason Hartman 39:20
Because 100 years and you know, you haven’t made any money. That’s shocking. And Dan, you know what, I’m not a fan of his, although I do think he’s what I call the master of the soundbite. He’s been on the show before and that’s Peter Schiff. And he said it, you know, he just has the zingers that are great. I mean, but you know, I think he’s, you know, out of his mind and a lot of things but one of the things he says is he says, if you look you know, at the at the market from the Great Depression did from 1929 until about 2007 or eight I believe, of course, these are important. periods because we had huge events, obviously in those times. Right. But But what he says the point is still very valid. He says, He says the Dow has is kept pace with gold. Everything is an illusion created by inflation, the returns have been dividends, that’s it. Nothing else.

Daniel Amerman 40:20
I mean, the dividends dividends used to be major, too. Yeah. Right. And then it used to be the dividends averaged about twice what government bond yields were. Wow. And that was the that was by far the biggest source of long term investing in stocks. And that’s been something I’ve been writing about for years, is that when everyone learned that stocks were the magic wealth creation machine, they bid the prices of stocks up so high that the dividend levels crashed, and the number one long term source of wealth from the stock market is no longer there.

Jason Hartman 40:55
Mm hmm. Yeah.

Daniel Amerman 40:57
It’s just amazing.

Jason Hartman 40:59
Yeah, it really is. It really is amazing. Okay, so what does this mean? Let’s kind of circle back to that main point, we’ve touched on it. But you know, with your chart here, tell us what it means to individuals and investors. And let’s kind of sum that up.

Daniel Amerman 41:14
Okay. If we look at the nation, and you look at the numbers over time, for a nation that has a national debt that exceeds the size of their economy, which is true of the United States, if they’re going to maintain financial solvency, they need a higher rate of inflation.

Jason Hartman 41:37
It’s just so so expected, because it’s coming to it, right? Yes,

Daniel Amerman 41:41
I’m not saying it needs to be hyperinflation, I’m not saying even needs to be 10% per year, 8% per year, but five 6% per year can really get the job done with without getting people to terribly upset, particularly if is reported through various measures as being less than that. Right. And what that means is that you have lower purchasing power for what wealth is created. Okay, now, let’s put this together. All right, what do we just go through, all else being equal, a heavily indebted nation needs lower interest rates simultaneously, all else being equal, a heavily indebted nation needs a higher rate of inflation. So what does that mean? You have less wealth created, you have that wealth that is created has a lower purchasing power, you have a lower cash flow in retirement, and that cash flow in retirement has a lower purchasing power. device,

Jason Hartman 42:38
right, coming in? What do you what do you so what do you do as an investor? Well,

Daniel Amerman 42:44
the first thing is to understand what’s happening here. And I shouldn’t laugh because it’s this report to so many people. But sure, I work with this stuff all day long. And it is, you know, it’s crystal clear. What’s going on here. What’s happening. And I think first and foremost, people need the knowledge to defend themselves. If you can do it, and I’ve got a lot of materials on that. I’m a believer, not just in income properties, but in income property asset liability management.

Jason Hartman 43:17
Okay. Explain that, if you would? Um, I mean, briefly, you’re,

Daniel Amerman 43:24
and again, we’ve had this discussion.

Jason Hartman 43:28
I just want to bring people up to speed.

Daniel Amerman 43:32
Return to it. Okay, um, you are a big fan of the income property. And I’m something much wackier, I’m a big fan of the mortgage. Not because I like that. But because debt can do very unusual things for you when you’re using asset liability management strategies that are simply not available to an ordinary person. Corporations use it all the time. Major investors use this sense all the time. But individuals don’t.

Jason Hartman 44:05
Yeah, very, very good point. So use that debt. And the debt deflates through time with inflation. And, you know, I always say, Dan, that most people think they made money on the real estate deal because the property appreciated in value, but largely, that, again, is an illusion created by inflation, right? Because it usually just tracks it, it just tracks it, but when, but when you leverage it, then you multiply that so if the inflation rate is 5%, and you’ve got 80% leverage on that asset, then you you have that multiplier effect that that five to one ratio, right, which is fantastic. But also you have what I call inflation induced death, destruction. And I, I talk about your charts all the time on that that are just incredible. And, you know, you have that that chart or that, you know, we famously talked about showing someone who bought the median price home in 1972. And then they kept it for 30 years, paid the mortgage all along, and they basically got paid to borrow the money they got paid to live there. They not only live there for free, they literally got paid to live in that house for three decades. Incredible, right?

Daniel Amerman 45:22
Yeah, if you if you do look at the numbers on a national basis, over most long term holding periods, you do not come out ahead, buying a residential home, particularly when you take into account the aging of the property. However, when you take into account the inflation driven destruction of the debt that’s financed in the property, you come out hugely ahead. That’s really this.

Jason Hartman 45:49
Yeah, yeah. And, and Si, si, you gotta buy, like, I would say that the mortgage is, is I’m more a fan of the mortgage than the property. So I really am I agree with you completely. But in order to get that great mortgage, that long term, fixed rate, low cost, arguably negative interest rate, I mean, arguably, depending on what the real inflation rate is, debt, you have to buy the property. So the property sort of a symptom of, of getting this great mortgage debt, right. Yep. Yeah. Very interesting. Very interesting way to look at things, no question about it. Well, then are Is there any question I didn’t ask you today or anything else you want to share before we wrap it up?

Daniel Amerman 46:31
No. I think we’ve had a good discussion. I’ve enjoyed it

Jason Hartman 46:34
again, Jason. Okay. Yeah, me too. give out your website. tell people where they can find out more about you.

Daniel Amerman 46:39
Daniel ammerman.com. And that’s Ammerman is spelled am er, man.

Jason Hartman 46:48
Fantastic Daniel ammerman.com. Dan, it’s always a great, great to have you on the show. So thank you for joining us again today.

Daniel Amerman 46:56
Thank you, Jason. It was fun talking with you.

Jason Hartman 47:00
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